Issue 7 | 5 April 2016

Every other week, the Fueled team hosts our own take on a book club. We call it Article Club and we all pop into a big conference room in our SoHo office to debate and discuss ideas and issues affecting tech. The basis of this conversation is 2-3 articles selected by senior members of the team.

The Articles

My Year in Startup Hell - Submitted by Aaron Cohen
Spotify Raises $1 billion in debt with devilish terms to fight Apple Music- Submitted by Joe Indriolo
What's Next in Computing? - Submitted by Yann Wanner

Dan Lyon’s behind-the-scenes article on his stint at Hubspot lets readers sip the KoolAid of startup culture. Hubspot, like many new and young businesses, aims to make work fun. Free beer, dogs in the office, and a stocked candy wall serve a purpose greater than increasing employee happiness. It’s actually a pretty successful tactic to entice cheap and eager labor. Recent grads, who will work difficult hours for little pay, have come to expect this type of startup culture.

A playful office is not just meant to attract new talent, it also promotes a work-life balance that is all work, no life. Under these conditions, work is supposed to be so comfortable that maintaining a social life outside of the office is unnecessary. No social life = more hours spent working.

Lyons shows us some pretty strong examples of this casual office atmosphere gone awry (intense partying that leads to a vomit-filled bathroom, for example). But this tactic is certainly not revolutionary. In 1992, Santa Cruz Operations put soda machines in their office. It may sound silly now, but for developers in this office, it was special.  For SCO on the other hand, it cost a couple hundred bucks on soda each month to ensure their developers would consume more caffeine daily, stay up later, and spend less time leaving the office for drinks. It’s a strategic move. While Dan Lyon’s expose might have read a bit harsh, Hubspot is not the only startup in the spotlight for this type of calculated culture.

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Apple Music may have opened to some lukewarm reviews in 2015 but they’re certainly not sweating it. Though Spotify has more users and has been around for ten years longer, this music platform is scared that switching costs won’t be great enough to prevent listeners from making the switch.

In a desperate attempt to revamp and stay afloat, Spotify signed a deal that is laughably one-sided with TPG and Dragoneer. Apparently the deal will allow for significant growth in marketing but, if Spotify doesn’t perform, their bank accounts will hurt. A lot. A few highlights:

• $1 billion in convertible debt with 5% annual interest and 1% increased every six months up to 10% in interest
• 20% discount at IPO which increases 2.5% every 6 months until they IPO
• AND if the IPO performs poorly, anyone (read: employees) who have stock options can’t sell until 180 days while TPG can sell after 90

Before you gawk at how Spotify’s leaders let this happen, understand that the company doesn’t have much choice. Revenue for 2015 was $1.22 billion compared to Apple’s which was, literally, 233x that. If Apple wanted to give Apple Music away for free, they could. Without batting an eyelash.

Perhaps it might make sense for Spotify to look towards their exit. Just as Pandora and Ticketfly have entered into a happy and blissful marriage, Spotify should consider how they might cozy up to a ticketing platform. Majority of artist revenue comes from concert sales with the tiniest percentage from legal downloads. Seems like it might be time to find a partner for that ticketing revenue.